SAP

Business Context and Reporting Period

This Form 6-K filing by SAP SE (SAP Aktiengesellschaft) reports preliminary financial results for the fourth quarter and full year ended December 31, 2002. The filing incorporates press releases issued on January 30, 2003, detailing performance in a challenging global economic environment. SAP operates as the world's leading provider of business software solutions, with significant market presence in Europe, the Americas, and Asia-Pacific.

Key Financial Metrics

*Adjusted for stock-based compensation and material acquisition charges.
**Excludes extraordinary gains, acquisition charges, Commerce One impact, and impairment costs.

Material Changes vs. Prior Period

• Revenue Growth: Full-year revenue grew 1% (€7.4 billion), driven by a 6% increase at constant currency rates. Q4 revenue declined 2% nominally but grew 5% at constant currency rates.
• Profitability: Operating income increased 24% year-over-year. Adjusted operating margin improved by nearly three percentage points to 22.7% for the full year.
• Net Income Volatility: Reported net income decreased 12% to €509 million due to impairment charges and acquisition costs. However, adjusted net income increased 21% to €1.0 billion.
• Regional Performance: EMEA revenue grew 7% (10% in Germany). Americas revenue declined 8% nominally but grew 2% at constant currency rates. Asia-Pacific revenue grew 2% (9% at constant currency rates).
• Market Share: SAP increased its worldwide license revenue market share to 50% (up from 41% in 2001) and became the number one business software application vendor in the U.S.

Guidance, Outlook, and Risks

2003 Outlook: Management expects to continue gaining market share and increasing profitability despite an unpredictable political and economic environment.

• Operating Margin: Expected to increase by approximately 1 percentage point compared to 2002 (excluding stock-based compensation and acquisition charges).
• Earnings Per Share: Adjusted EPS for 2003 is forecast in the range of €3.45 to €3.60 per share.

Management Commentary: Executives highlighted successful cost containment, a leaner organization, and a shift toward smaller deal sizes with larger strategic commitments. New product launches include SAP xApps, the newest version of mySAP CRM, and R/3 Enterprise.

Risks and Contingencies: The filing includes standard forward-looking statement disclaimers regarding risks that could cause actual results to differ materially from expectations. Specific risks cited include the unpredictable political and economic environment. The filing notes that financial information is preliminary and unaudited.

Investor Verification Checklist

• Adjusted vs. Reported Earnings: Verify the magnitude of non-recurring charges (Commerce One impact, TopTier acquisition costs, and minority investment impairments) that caused reported net income to decline while adjusted income rose.
• Currency Impact: Confirm the constant currency growth rates, as nominal revenue declines in the Americas were masked by currency fluctuations.
• License Revenue Trend: Monitor the decline in license revenues (down 11% for the full year) versus the growth in maintenance revenues (up 14%) to assess the shift in revenue mix.
• 2003 Guidance Execution: Track Q1 2003 results against the specific guidance of a 1 percentage point operating margin improvement and the €3.45–€3.60 EPS range.
• Share Repurchases: Verify the status of the remaining share buyback program, noting €279 million was repurchased in 2002.